The Wall Street Journal recently published an article suggesting earnings are far worse than reported based on a widening gap between Pro Forma and Reported (GAAP) earnings. Pro Forma earnings exclude certain items like restructuring charges and stock based compensation and shows U.S. companies earning 0.4% more in 2015 then 2014 – the weakest growth since 2009. When you look at earnings based on GAAP reporting EPS actually fell by 12.7%, the sharpest decline since 2008.

There is also concern about “one-time events” taking place every quarter. One-time events allow a company to clean up their books by writing off bad investments, accounting for the cost of a layoff or other infrequent business expenses. It sounds like bad things are happening in corporate America on a more frequent basis.

Investors continue to plug their nose in hopes this is a short-term development with sales and profits to recover later in the year. It could happen, often during a earnings decline the market will anticipate the earnings recovery sending stocks higher. This late in the credit cycle risks are higher earnings will contracting further before making a recovery.

Q1 earnings have been adjusted down by analysis, probably too low, which allows companies to “beat” their estimates sending the stock higher. Just another reason for investors to be very selective and careful regarding their exposure to stock investments.